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Firm size and the interlinkages between sales volatility, exports, and financial stability of Pakistani manufacturing firms

Abdul Rashid (), M. Kabir Hassan () and Hafsa Karamat ()
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Hafsa Karamat: International Islamic University (IIU)

Eurasian Business Review, 2021, vol. 11, issue 1, No 5, 134 pages

Abstract: Abstract This paper scrutinizes the interlinkages between exporting, sales growth volatility, and survival probabilities for Pakistani manufacturing firms. It also studies whether variations in firms’ domestic sales induce them to start exporting and whether entry in foreign export markets helps reduce firms’ bankruptcy chances. The results indicate that exporting helps firms in lessening sales growth volatility and enhances the likelihoods of firms’ survival. The results also suggest that firms with higher sales growth volatility are more expected to be bankrupt. Yet, we show that they can reduce their chance of bankruptcy by starting exports. We also investigate whether these impacts are different between firms of different sizes. We find that compared to large-sized firms, both small- and medium-sized firms are more expected to start exporting to lessen domestic sales volatility. Finally, we observe that the volatility-lowering effects of exporting are higher for small-sized firms, whereas, the solvency-deterring effects of sales volatility are higher for large-sized firms.

Keywords: Exporting; Export entry decisions; Default probabilities; Sales growth volatility; Firm size (search for similar items in EconPapers)
JEL-codes: D21 F14 F31 L25 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s40821-020-00162-w

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